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My Turn: SB21 enables exploitation of Alaska's resources

Posted: December 19, 2013 - 1:12am

The vast majority of the oil flowing in the pipeline comes from just two fields: Prudhoe Bay and Kuparuk. The oil from just these two fields should be the bench mark against which SB21, the tax giveaway plan, is measured.

A study performed by Alaska’s Department of Revenue recently estimated that one-year real losses to Alaska from SB21 just from these two fields, Prudhoe Bay and Kuparuk, approach $1.7 Billion (March 11 analysis). That should cause everyone to shudder.

To those that think that “promised” increased throughput under SB21 from Prudhoe Bay and Kuparuk will overcome the loss of revenue, BP’s reservoir development manager on Nov. 20 said to the Resource Development Council: “We can’t stop the decline. As go Prudhoe and Kuparuk, so goes the North Slope.”

Decisions by the three big oil companies were made decades ago to place Alaska’s legacy oil fields in harvest mode. The “Big 3” determined that their level of capital investment in infrastructure, such as the above ground treatment facilities, was appropriate for them. As part of that harvest mode extraction model, the billions in profits made by the Big 3 in Alaska were intentionally transferred to other regions of the world — not spent here. This determination was made under the previous tax system known as ELF and continues.

Under ELF, the tax rate on the nation’s second largest oil field, Kuparuk, approached 0 percent and 15 of the 19 operating fields paid no tax. The North Slope remained in harvest mode under ELF; no throughput increases occurred, even with essentially zero tax rates. There is no reason that anyone should think that SB21 will increase oil, which has been flowing for over 35 years, from the two fields in Prudhoe Bay and Kuparuk .

The ELF tax rates at or approaching 0 percent did not produce any lasting action by the Big 3 to increase rates of throughput. Please remember the failed “No decline after 1999” political motto. It is folly (or blind allegiance to big money) to think that SB21 will increase throughput when Alaska’s own history at low — or even zero taxes rates — did not result in increased throughput.

The important points to remember regarding ACES is that it brought record levels of capital investment, record levels of employment and a record number of companies doing business in Alaska. These successes under the 2007 ACES legislation are objective and measurable. Alaskans should know this about ACES.

SB21 would return Alaska to ELF-like taxation. Under SB21, at high oil prices, the Big 3 would rake in windfall profits from the sale of our resources. Alaskans would then see and understand that our resources are being looted. We would be like an exploited third-world country where the country’s non-renewable resources are forever taken away and there is nothing left in the treasury for the people.

Alaska’s constitution mandates that Alaska be an owner state. Alaska’s history is unfortunately full of recurring examples of exploitation of our resources by outsider interests. The outsiders’ activity is always sold as development, but it only takes a little looking to discover exploitation under the thin disguise of development. SB21 is exploitation of Alaskans’ ownership rights under Alaska’s constitution.

Alaskans should never forget that oil is a depleting, finite and non-renewable resource. Once gone the oil is forever gone. Once sold cheap, the true value to Alaska can never be recaptured. If the oil is sold cheap by Alaska, there would never again be the opportunity to get fair value for that oil. SB21 is a giveaway that sells our resources far short of fair value.

The private owners of the oil resources in North Dakota and Texas demand and receive $2.5 to $3.5 billion per year (same volume of oil) more for their ownership interest, their royalty, than does Alaska. Alaskans should factor this into their thoughts on whether Alaska is exploited under SB21.

The projection on Dec. 12, 2013 by Alaska’s Department of Revenue of deficits for each and every year of over $23 billion (2015–2024) at capped general fund spending and $100 per barrel oil pricing is partial proof of Alaska’s exploitation under SB21.

ACES should be kept, but it should be modified at high oil prices. The way to keep ACES is to scrap SB21. Keeping ACES is consistent with honoring Alaska’s constitution and promotes Alaska as a true owner state. Keeping ACES blocks exploitation of our resources.

• Joe Paskvan if a former state senator and chair of the Senate Resources Committee.

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